China poaches 3,000 chip engineers, but Taiwan winning from trade war

04-Dec-2019 Intellasia | TaiwanNews | 6:02 AM Print This Post

China has lured away 3,000 chip engineers from Taiwan as part of its “Made in China 2025″ plan to create a fully “red supply chain” with all foreign competitors eliminated, but the US-China trade war is putting a monkey wrench in the communist country’s grandiose plans.

“Made in China 2025″ initiative, a major source of friction between the US and China, is a plan unveiled in 2015 to enable the communist country to overtake its Western rivals in multiple technological fields. This plan includes building a “red supply chain” with Chinese technology companies given favourable government treatment to enable them to squeeze out foreign competitors, including Taiwanese, entirely from the production process.

A major stepping stone in creating this red supply chain is to lure away top Taiwanese chip engineers to provide their expertise to Chinese firms. Taiwan’s Business Weekly reports that over 3,000 Taiwan semiconductor engineers have been poached by China in recent years.

Based on data from the Taiwan Institute of Economic Research, this amounts to approximately ten percent of all of Taiwan’s engineers engaged in semiconductor research and development. Although this practice of enticing Taiwanese engineers is not new, the quantity of high-level Taiwanese engineers poached by China has accelerated significantly since 2015.

Beijing is reportedly offering double or triple the pay and benefits to top-grade engineers to lure them away from Taiwan. In the case of a 50-year-old engineer who spoke to Nikkei Asian Review, he said that he was offered double his pay in Taiwan and pay for his child to attend a private school.

The report cited an industry insider as saying that Chinese firms are rcruiting “not only top executives, but entire production teams on the ground.” The source also claimed that Chinese companies are offering “two to three times” as much as their Taiwanese counterparts.

Taiwanese companies are trying to counter this trend by raising pay levels, but are at a disadvantage as they do not enjoy the massive government subsidies and market protections the Chinese companies receive. Although Taiwan beefed up its Trade Secrets Actto penalise those who leak corporate secrets abroad to 10 years, many engineers are still jumping ship to Communist China.

China issued the “31 Measures” on February 28, 2018, in a bid to attract more Taiwanese talent and win sympathy from the public. On November 4, China’s Taiwan Affairs Office (TAO) and National Development and Reform Commission (NDRC) announced 26 additional “measures to further promote economic and cultural exchanges and cooperation between the two sides of the Taiwan Strait,” including 13 for Taiwanese companies and 13 for Taiwanese citizens, which are purported to provide “equal treatment with the Chinese populace.”

However, both sets of measures have been widely mocked in Taiwan as merely propaganda ploys. In addition, Taiwan has actually benefited from US-China trade war in terms of greatly increased exports to the US at the expense of China.

On November 5, the UNCTAD released a report titled “Trade and Trade Diversion Effects of United States Tariffs on China,” which acknowledged that the trade diversion effects have increased imports from nations not directly engaged in the trade war and brought “substantial benefits” to Taiwan, Mexico, and the European Union. On November 18, German online statistics portal Statista published a report showing that over the first nine months of this year, US imports from Vietnam and Taiwan have seen a year-on-year surge of 35 and 21 percent, respectively. During the same period, US imports from China plummeted by 13 percent.

While China may be poaching some Taiwanese engineers, Taiwan is bringing back whole companies and production lines back home from China thanks to a combination of government incentives and the trade war. In August, Taiwan’s surpassed its goal of having returning Taiwanese companies invest a total of NT$500 billlion, four months ahead of schedule.

On August 2, the Ministry of Economic Affairs (MOEA) revealed that with another four companies signing up for the programme, the total for the year so far had reached NT$504.7 billion, the Central News Agency reported. The investments were expected to create 43,900 jobs inside the country, the government said.

As of November 28, the MOEA announced that 156 Taiwanese-owned companies that had been operating in China had pledged NT$703.4 billion in investments, according to InvesTaiwan. The MOEA estimates that the total infusion of investment is expected to bring in 56,000 new jobs in the manufacturing sector, reported Taiwan Today.


Category: Taiwan

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